Total Return on a Rental

Cap rate and cash-on-cash return both answer a one-year question. But most landlords do not sell after one year — they hold for five, ten, twenty. Over a real hold period, three things pay you: the rent left over after costs, the equity the mortgage quietly builds with every payment, and whatever the property is worth when you sell. This calculator adds all three together and annualizes the result, so a multi-year hold can be compared to a single percentage the way you would compare any other investment.

What this calculator answers

It projects a rental property forward across a chosen hold period and totals three sources of return: cumulative after-mortgage cash flow, the equity built through mortgage paydown, and the gain (or loss) from price appreciation, net of selling costs. It expresses the result both as a total dollar profit and as an annualized percentage return on the cash you put in — down payment plus closing costs.

What it deliberately does not cover

This is pre-tax: it does not net out capital gains tax owed at sale, or the income tax owed each year on positive cash flow. It does not model major repairs or capital expenditures over the hold — a new roof or furnace partway through will change the real number. It assumes operating costs grow at the same rate as rent, which will not always hold. And it does not assume any cash flow collected along the way is reinvested; it is simply added to the total.

Every input, explained

Purchase price. The price you pay for the property.

Down payment. Toggle between percent and dollars. Non-owner-occupied rentals require at least 20% down in Canada — mortgage default insurance is not available for investment properties.

Closing costs. Land transfer tax, legal fees, and the rest of the one-time cost of buying. Use the Closing Costs calculator to build this figure precisely for your province, then enter the total here.

Monthly rent. Expected gross monthly rent. This can be set to 0 to model a property held without a tenant — a vacation property, a flip that stalls, or a worst-case stress test.

Operating expenses / mo. Every non-mortgage carrying cost per month: property tax, insurance, condo fees, maintenance, vacancy allowance, management. Use the Rental Cash Flow calculator to build this figure up line by line.

Mortgage rate and amortization. Your mortgage contract rate and amortization period, used to compute both the monthly payment and how much principal gets paid down by the time you sell.

Hold period. How many years you plan to own before selling. This is the lever that separates this calculator from a single-year snapshot like cap rate.

Appreciation (%/yr). A planning assumption for how much the property's value grows each year, compounded over the hold period. The common error is anchoring this to a single recent year rather than a long-run average.

Rent growth (%/yr). A planning assumption for how much rent (and, in this model, operating costs) grow each year. The common error is assuming rent never changes over a long hold.

Selling costs at exit (%). Commission plus closing costs on the sale, as a percentage of the future sale price. Use the Net Proceeds calculator for a precise, province-specific figure.

How the math works

The mortgage payment is calculated using Canadian semi-annual compounding. Cash flow is projected year by year: rent minus operating expenses, both grown at the rent-growth rate, minus the annual mortgage payment, summed across every year of the hold. The ending property value compounds the purchase price at the appreciation rate for the number of years held. Equity from mortgage paydown is the starting mortgage balance minus the remaining balance after that many months of payments. Net sale proceeds are the ending value minus selling costs and the remaining mortgage balance. Total dollar return is net sale proceeds minus cash invested, plus cumulative cash flow. The annualized return converts that total into a compound annual growth rate on the cash invested — floored at −100% per year if losses exceed the cash invested, since a return cannot go below negative 100% annually.

Worked example: $700,000 rental held 10 years

A $700,000 rental is bought with 20% down and $12,000 in closing costs, renting for $3,100 a month against $980 a month in operating expenses, financed at 4.65% over 25 years, and held for 10 years with 3% annual appreciation and 2% annual rent growth.

1. Mortgage: $700,000 − 20% down ($140,000) = $560,000. Cash invested: $140,000 down + $12,000 closing costs = $152,000.
2. Monthly mortgage payment on $560,000 at 4.65% over 25 years: $3,146.32, or $37,755.81 a year.
3. Cash flow each year (rent minus operating expenses, both growing 2%/yr, minus the mortgage payment) summed across all 10 years: −$98,997.15. Rent barely covers the mortgage payment in year one, so the running total stays negative for most of the hold.
4. Ending value after 10 years of 3% appreciation: $700,000 × 1.03¹⁰ = $940,741.47 — a gain of $240,741.47.
5. Remaining mortgage balance after 120 payments: $408,400.26, meaning equity paydown of $560,000 − $408,400.26 = $151,599.74.
6. Selling costs at 5% of the ending value: $47,037.07. Net sale proceeds: $940,741.47 − $47,037.07 − $408,400.26 = $485,304.14.
7. Total dollar profit: ($485,304.14 − $152,000) + (−$98,997.15) = $234,306.98 — a total return of 154.15% on the cash invested, or 9.78% annualized over the 10-year hold.

Notice how little of that return came from rent. Appreciation ($240,741) and equity paydown ($151,600) together dwarf the negative cash flow. That is typical at current rates: financing a rental mostly pays for itself through price growth and principal paydown, not monthly profit.

Provincial quirks and edge cases

This calculator uses lump-sum inputs for closing costs and selling costs rather than province-specific tables, so the province itself does not change the formula directly — but it changes what you should enter. Land transfer tax alone varies enormously: use the Closing Costs calculator to get a real number for your province before entering it here, and the Net Proceeds calculator to get a real selling-cost percentage rather than the flat 5% default. Setting monthly rent to $0 is a valid and useful stress test — it shows how the return looks if the property sits vacant or is bought purely to renovate and sell, similar to the scenario the Flip or Renovate calculator handles for shorter holds. A negative appreciation or rent-growth input is also valid, for stress-testing a declining market. Very short hold periods (1–3 years) will show selling costs eating a large share of any gain, since they are paid once regardless of how long the property was held.

Questions to ask a professional

1. Mortgage broker: What rate and amortization can I actually qualify for on this property, and how does that change the equity-paydown figure?
2. Realtor: Is my appreciation assumption reasonable for this specific neighbourhood, or is it built on a citywide average?
3. Property manager: Are my operating expenses realistic, and are they likely to grow faster than rent over this hold period?
4. Tax professional: How much of this total return would I actually keep after capital gains tax and annual income tax on positive cash flow?